GM considering Isuzu stake sale

GM is battling against rising costs and competition

General Motors is in talks about the possible sale of its stake in Japanese sports utility vehicle maker Isuzu.

The US automotive giant currently holds about 8% of Isuzu's stock, worth an estimated 38 billion yen ($320m).

A sell-off would raise some much needed cash for GM, which is undergoing a huge restructuring drive involving the loss of hundreds of thousands of jobs.

The news came as Moody's Investor Service cut some of GM's debt ratings further into "junk" status.

A junk status rating suggests that a company is more likely to default on its debt.

The credit rating agency Moody's cut GM's senior unsecured debt one notch to "B3," six levels below investment grade, from "B2".

At the same time, fellow rating agency Standard & Poor's also warned it may lower its current junk ratings on GM.

The news came as GM, which lost $10.6bn last year, filed its delayed annual report, restating several years of financial results.

Exiting Japan

GM is battling against rising costs, falling sales and mounting competition from Asian rivals.

Under a huge restructuring plan, the firm is planning to cut 30,000 jobs and close 12 plants by 2008.

Selling the stake in Isuzu would continue GM's recent withdrawal from its partnerships with Japanese automakers.

Earlier this month GM slashed its stake in Japan's Suzuki Motor from 20% to just 3%, while last year it sold off its entire 20% stake in Fuji Heavy, the maker of Subaru vehicles.

Finance arm rumours

Further reports also suggested that the US carmaker was close to agreeing the sale of its GMAC financing arm.

According to the Wall Street Journal, citing sources close to the deal, GM is preparing to sell a majority stake in the unit to an investor group led by Cerberus Capital Management.

GM has agreed the broad outline of an agreement with the group in return for an expected offer of $11bn or more for a controlling 51% holding in the firm.

In October last year, the carmaker said it was considering the sale of a stake in GMAC, which offers loans to US customers for the purchase of GM cars.

While GM has struggled with large losses in the face of falling sales and tough competition, its finance arm has remained highly profitable.

Last year GMAC earned $2.8bn, compared to GM's overall loss of $8.6bn.

A week ago GM sold its property finance arm GMAC Commercial Holding for about $9bn.